For some time already, interest income earned on ‘regulated’ (Belgian) savings accounts have been tax exempt up to €1,880 per taxpayer per year. Any amount earned above this was taxed at a reduced tax rate of 15%. As from income year 2018 (tax year 2019), this tax-free amount has been reduced to €960.
In practice, this will not affect many taxpayers. With the current market conditions and low interest rates, you may own €872,500 in savings at an average rate of 0.11% per year before taxation kicks in. For a married couple, this can even be up to €1,745,000. Exceeding the threshold can also be avoided by opening several savings accounts with different banks.
Instead, a tax exemption has been introduced for the first €640 in dividend income earned per taxpayer from January 1, 2018 onwards. Married couples or legal cohabitants can each claim this amount in their joint tax filing, which equals a total tax benefit of €384.
With this new exemption, the Belgian government wants to encourage taxpayers to invest more in risk capital instead of leaving your funds on a savings account. Dividend income earned by a private individual is normally subject to a 30% domestic tax rate. The exemption allows you to reclaim this 30% (or €192) previously withheld on max. €640 of annual dividend income.
The exemption applies to domestic as well as foreign dividends but does not apply to interest that has been qualified as a dividend, nor does it apply to dividend income from legal structures. Dividend distributions from investment funds such as SICAVS, are not eligible either. As the Belgian government wants to encourage direct investment in companies, the dividends that you receive from your own company are also eligible (even if a reduced withholding tax rate under ‘VVPRbis’ or ‘liquidation reserve’ applies).
The taxpayer has to check each time if tax has been withheld at source and which rate applied in order to determine the amount that can be recovered. The tax amount that qualifies for a refund (€192 or less) has to be included in your Belgian resident or non-resident tax return (Code 1437 or 2437). In other words, the taxpayer has to explicitly claim back the amount, otherwise it will not be granted.
If you only received foreign dividends, in most cases no Belgian withholding tax was deducted at source. If this is the case, there is obviously no withholding tax to reclaim, but instead the total dividend income to report (Code 1444 or 2444) can be reduced with an amount of €640 per taxpayer in order to still benefit from the exemption. This option would only be open to resident taxpayers, but not for non-resident taxpayers who are taxable on Belgian source income only.
For income year 2019 (tax year 2020), the exemption will be increased to €800.00 of annual dividend income. In other words, a personal tax benefit of €240.00.